Dave’s Hot Chicken: Arman Oganesyan

24:46You're good to go. That's really valuable information. I'm going to remember that if I ever open a restaurant. I'm going to recruit Armenian mothers to try my food before I open. That's so funny when you think about it. We did a lot of experiments. We're very spiritual people, and we kind of always believe that the universe is helping us and guiding us. and you know a lot of weird things would happen like our logo for instance you know I remember we went to swap me to buy like you know I think like a container for oil or something like that yeah and we're just like in a kit like a store that sells kitchen equipment and there's one rubber chicken for sale there and I was like Dave I'm like what are the chances that there's a rubber chicken for sale at a store that sells kitchen equipment and swap meet and there's only one of them I'm like I feel like this is kind of meant to be let's buy it so we bought that chicken and obviously that's eventually what ended up becoming our logo was that rubber chicken.

25:37You're like mascot. Yeah. So there was a lot of things like that, like our brine, like we spent weeks trying to figure out a brine, right? And, you know, Dave had like milk brine and this and nothing was right. And one day we were really tired and, you know, we're like, we're like, we're done with cooking today. And we had a few pieces of chicken leftover. And I was like, yo, Dave, where should I put this? And there was like a Velasic pickle jar that was pretty much empty. And he dumped out the rest of the pickle juice and he's like, put it in here. I'm like, oh, that's nasty dude I'm like there's pickle juice in there he's like oh no he's like it's fine it's like chicken and pickle just not a big deal so we put it in there and we left it in there and when we came back like a few hours later and we took it out it looked like like like the the salts had almost worn away at the chicken and opened up all the muscles and made it so tender so we're and then when we cooked it and we tried it we're like dude this tastes so good we're like why don't we just use this and then obviously we added a little bit more recipes to the uh to the pickle juice but The pickle juice eventually became our brine.

26:35And it was like accidental discovery. All right. So you guys are working on this recipe. Meantime, trying to figure out how to get a food truck. What's the status of the food truck? So obviously, again, just like everything else, we realize we're pretty and over our heads when it comes to being able to afford a food truck. So as we were getting closer to having the recipe more or less finalized, we started kind of like looking into what a food truck actually costs. It was way, way, way, way over budget. Like there's no way we could afford it. So I remember I was having a talk with one of my friends, Ed, because he used to own a chicken wing place.

27:16And I was just kind of trying to ask him for advice, like what he would suggest. And he's like, well, have you guys ever considered doing like a pop-up? So we're like, well, that's not a bad idea. We're like, we could probably start a pop-up a lot faster. We could save some money through it. And maybe within a year of working this pop-up, we could afford a food truck. Yeah. So that kind of became our goal now. It was like, okay, now we're doing a pop-up. That was our thing. You know, we planned a lot of different things around it, like Farley. Farley is the reporter from Eater LA. For Eater LA, yeah.

27:46I mean, we used to go to all the restaurants he would suggest, right? So he had a very big pool on people in LA. Like when he would recommend a place, like people would go there. And you followed him, this reporter specifically. Yeah, we knew we wanted we really wanted him to try Dave's. Like that was one even way before we were in the pop up or anything, as we were still talking about like the foundational stuff. One of the things were like, OK, once we're ready, we need to have Farley come and try the food and write an article about it. Because we're like, that's what's really going to blast us off to the next level.

28:15So we saw what he had done for other restaurants and we kind of understood that like if our food was good and we had good operations and we can kind of get that little boost from him where people know us, then we can kind of ride that wave. All right. So you had him in sights, but you're not going to get to him yet. First, you have to figure out how you can do this pop up thing. Yep. So how are you going to do it? okay so Tommy's parents had a little flower shop in Hollywood in like this little plaza and Tommy's like well I could potentially maybe talk to the landlord to see if he'll you know give us a little space there and we asked him about it and so he's like I can give you guys a little parking lot space across the street in this parking lot plaza where we eventually ended up and it's funny because we didn't like it we're like dude we're like it's not visible we're like it's dirty we're like it's parking lot like this place isn't right at all you know we're like this is not gonna work here and this was by the way where what where was this part where is this parking lot in uh this is in hollywood boulevard east hollywood boulevard so in east it's east hollywood yeah and he's like you guys can have a pop-up and was he gonna charge you at first he said no he's like you guys can have it for free so you guys have one spot for free yeah and then tommy was like let's just do it and he's like and funny enough it was like early morning he's like let's do it tomorrow and we're like what do you mean tomorrow he's like okay he's like we have the spot right we're like yeah he's like we have the recipe we're like yeah he's like so why don't we do it tomorrow and we're like we have no equipment we have no nothing he said okay how much money do we kind of have and we all kind of like um i had like a few hundred bucks that i had saved up dave's like well i'm getting my paycheck in like a day or two and he was gonna quit anyway so he's like i'll have like a few hundred bucks and then tom's like okay i'll cover whatever's left you know so we had like a budget of like 900 that we set right with 900 bucks and did you apply for permits and stuff like that?

30:00No. No, okay. Dave wanted to, we're like, because once we got the official location of the pop-up, right? Yeah. Me and Dave were like, oh, we should apply for like all of our like paperwork before we get started. And then Tommy was like, he's like, we're not, we're not going to get paperwork. He's like, nobody's going to give us paperwork to open up on a street. He's like, we either do it or we don't. It was just like, let's do this and ask for forgiveness later. Yeah, exactly. When we come back in just a moment, how the pop-up begins to pull in hundreds and then thousands of dollars, and how a chunk of that change winds up in a dumpster.

30:37Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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34:18Hey, welcome back to How I Built This. I'm Guy Raz. So it's May of 2017, and Armand and his partners have set up a tent and a fryer in a parking lot in East Hollywood to sell their spicy fried chicken tenders and fries. The first day, we had literally like a few tables that we got from our parents, a$150 fryer, an easy up. We had a heating lamp for the fries. and pretty much that was it besides like you know all the like sheet trays and stuff like spicing and and so all right so you have you you bring all this stuff to the parking lot and you open up what time of day did you open up so like we did we did an initial test run the day before it was on uh the first and um we we posted that we're gonna open up at seven but we really opened up at like eight obviously nobody showed up because you know it was on ig with like 50 followers and my girlfriend was there, Lola, with three of her friends and they were our only customers for the night and they bought four meals and we made$40 that night.

35:24So 10 bucks for a meal. Yeah, yeah. What would you get for 10 bucks? You'd get two tenders, fries and slaw. Nice, okay. Yeah, it wasn't bad at all. It was pretty affordable, I think. So you sold four meals and what was the verdict? Were they like, oh, they loved it. But the second day when we went back, We're like, okay, we have to get more serious. So we got back and we obviously didn't have that many customers. So the first thing we did is we cooked like three chicken tenders. We cut them up into little pieces. And me and Tommy kind of like walked around the block. And, you know, there was like a few, there was like Jumbo's Clown Room, which is a pretty popular like burlesque bar down the street.

36:04And they had a long line. So we went and we kind of started handing out pieces of chicken to people in the line, whoever would take it. And what was really cool is a lot of the people came back like a couple hours later. You know, that second day we might have made like$80,$90 or something like that. But we were like, wow, like, dude, they were all real people. Like nobody was like girlfriends or friends. They were just real people that came in from either trying a sample or just passing by. You know, and then again, the third day, even more people came by. People, you know, would bring a friend and be like, this is the place I tried yesterday.

36:33And it was really good. Meantime, you had this strategy to get this guy, Farley. Yeah. eater critic to come to the restaurant? How were you even going to do that? So here's the interesting thing. We wanted him to come, but we knew we didn't want him to come really early on. We knew as much as a Farley article would help us, if it came at the wrong time where we weren't ready for it and we got an influx of customers and we couldn't serve them, then it was actually going to be detrimental to us and not help us. So we knew that we needed him to come when we were a little more familiar with our operations and when we felt like we could actually serve people in like a speedy pace.

37:10So how are you going to get his attention? So funny enough, Farley contacted us on Instagram. Like I remember I saw the message and it was Farley and he was like, Hey, I heard about what you guys are doing and I really want to come check out the food. And I was like, Oh man, I'm like, that's crazy. But it was pretty early on. We had like five days in. So to us, it was still early because we wanted at least like a few weeks or a month under our belt, you know? Yeah. And he came on like day five or six. Did you know that he was there? Did you recognize him? Yeah. I talked to him and me and him had like a conversation.

37:45I was like, yeah. You know, he's like, I'll come around. And sure enough, like he showed up and he was, he did. I don't think he realized like what a small operation it was. Yeah. Because he kind of looked at it and he's like, he's like, this is what you guys are doing. He's like, he's like, why? And he was really curious, like, why do it like this? And, you know, we kind of explained like we have no money and we just had a recipe and we felt like the recipe was good. And this is the only way that we could sell it to people was just kind of setting up in the middle of the street and just, you know, bootstrapping it.

38:16And I mean, you must have been pretty nervous when he finally tried the food. So what happened? How did he react? So he had a tender and he didn't give an overwhelming reaction. So we couldn't gauge whether he loved it or not. You know, he was like, he was like interesting. You know, he was, he was kind of like more like that. And just, he wants to kind of get to know us. Right. And I remember mentioning to him, I'm like, Hey, if you're going to write an article and I'm like, I don't know if you are, I'm like, but please, if you are, please make sure to mention that we're like a weekend. We have a very small friar.

38:49And if anybody comes, they should expect very, very, very long wait times, which is funny enough. When he wrote his article and he wrote a late night chicken stand will blow your mind down on the bottom he had written, you know, get ready to wait because they're a very new operation. So what happened the next day? It was like, it was kind of like we made it, dude. Like everybody that had doubted us was like, dude, you guys got an article. And it was so weird to us. Like we'd never been a part of anything like that. Like somebody writing about something we did, you know, reading the article and the things he said was, it was so overwhelming to us because he was saying so many nice things.

39:24So the next, the day after that piece, that night, what happens? So we obviously get to our pop-up late, knowing us. We're supposed to be open at 7, that's what it says in the article. We get there at like 7.15 and there's maybe like 90 people in line at the pop-up late. At your little tent pop-up. And it's not set up and it takes us like maybe 15 minutes to set up or 20 minutes to set up. Wow. And our dads were there too and they were like, what are all these people doing here? And you had people from the other businesses were coming out. Because they'd seen us for four or five days there just cooking and then the sixth day, there's like 100 people in line.

40:04Did you have enough food to feed everybody? No, we didn't. What's funny is as we got there, we were really nervous and we kind of didn't know what to do. And then our dads kind of gave us a little courage, like, don't worry, you guys got this. And we're like, wait, we got this. And as we started setting up, I kind of walked everybody in line. I said, hey, thank you guys so much for coming. We're a very new operation. So it's going to take us a long time to set up. And I'm like, our fryer makes about four orders every 20 minutes. We might not be able to serve everybody. And that first day was hectic, dude.

40:33It was hectic. But we adapted quick. So after that night, me, Tommy, and Dave, we kind of got together. We're like, hey, we need to adjust our system, dude, because this is not going to work. And we had just enough to buy another fryer. So we went and we bought a bigger fryer that made like 18 orders every like 10 minutes. So now we were ahead of the curve. So now even though we have this long line, we were actually producing orders really fast. So here's the thing, right? One article can have a massive impact, but oftentimes that impact can be very short term. Like, you know, you could have, okay, 80 people come and then 100 people come.

41:08And then, you know, for a couple of weeks, it's like a line of 80, but then eventually it kind of tapers off. Right. And there are very few restaurants anywhere that can sustain long lines. So how are you going to kind of sustain them? I mean, now you've got this thing and it's still two tenders, right? Chicken tenders and it's not sandwiches yet. No, that was part of our strategy too. We did tenders at first because we knew that if a month later we added sliders, then we can get a whole new wave of media. You know what I mean? So you start off with tenders, you get all the media coverage you can, then you add sandwiches to your menu and kind of get another lapse of, you know.

41:48And then people are like, now they've got sandwiches. Now they've got sandwiches. Yeah, exactly. And could people get their spice level or would that come later? Yeah. That time we had, I think, mild hot and extra hot. Okay. And probably a lot of people coming, certainly in those early days, are going for extra hot because these are Nashville hot chicken freaks. Yep, yep, yep. Obviously, because we only had a limited amount of time, right? The chicken took like 16 minutes to cook. So you'd have to set up 18 plates. You'd have to put bread in all of them. If it was sliders, you'd have to start toasting the buns.

42:20And then you'd have to... So it took a while to set everything up. And then once the chicken came out, you needed to spice it and get it on the bread one second earlier so it could be piping hot. And then the fries would go on it and it would go out. So it was very clockwork. If you missed a second, you could ruin the next batch. So in a matter of months, you guys are probably pulling in a thousand bucks a day. A little more than that. A lot more? We're doing like a few thousand a day. So, I mean, okay, what about the guy who lets you use the parking lot for free? That's the thing. It's like, dude, he came in like a month in and he's like, what is this?

42:59And he's like, the guy's got a whole restaurant over here. Because there was like a hundred people. He's like, I thought this was a hot dog. So I was like, I'm going to have to start charging. And every month he charges a little bit more until we eventually got out of there. But like he was a great guy. and we kind of understood that allowing three kids to do a pop-up in your parking lot is taking all the liability. If anything happens, it's on you. It's your property. So we kind of appreciated that he was taking that risk for us, and we kind of understood that paying him rent was just part of business.

43:27So we were happy. We were just happy to be there. Yeah, it was really nice of him. And tell me about just like your day-to-day life. Is that whole summer of 2017 just a grind? like every day, like tens, hundreds of people in line. Yeah. It was really cool, actually. So me and Dave would have to wake up early to go shopping for the food. So we'd wake up at like maybe 7 or 8 o 'clock. And we'd kind of go to Restaurant Depot. We'd buy our chicken there. We'd buy fries, obviously the spice mixes, all the different peppers to make the spice mix with, just all the food stuff. And then we'd kind of come back.

44:08So we would do our prep at Tommy's house because Tommy had like the biggest backyard out of all of us. And Tommy's grandparents would actually help us. So like his grandpa would pour out all of the sauces into like the containers for us, into like the little boxes. And his grandma would help us make the lemonade every morning. And then from literally like 10 or 11 until like 5 o 'clock, we were just prepping the food. But yeah, it was a lot of prep because obviously like each individual tender, you know, you have to wash it. You have to brine it. You have to spice it. You have to put it into flour.

44:40So it was like a long process. So we barely finished in time. What time did the pop-up close? Like what time did you stop serving sandwiches? Like, I mean, we would sell out fast, but by the time we got through all the orders, it'd be close to midnight. So midnight, then you've got another hour or so of cleanup. Like two hours of cleanup. All right, home at 2 a.m. and then up again at 7, 8 a.m. Six days a week. Took Sunday off? We took Sunday off and all we could do was sleep. And for six months, that's what it was. So, all right. I mean, if you guys were doing a couple thousand bucks a night on good nights, I mean, it was just a matter of time before you're bringing in like 50 grand a month.

45:20Yeah. Maybe more. Yeah. I mean, I remember, like, obviously the first month we started in the middle of it. We were still getting, you know, all of our operations and stuff down. And, you know, our parents, as proud as they were of us, were like, hey, well, are you guys making any money? Like he has been doing it for a month and there's all these people, but where's the money? And obviously at the time we were just kind of reinvesting most of it back into the pop-up, you know, but the second month, um, was the first month that we actually paid ourselves. And at the end of the month, we, we had each made like, I think it was like 10 or 11 in cash.

45:53Yeah. Wow. And it was the most money I'd ever seen in my life at the time. Wow. You guys made 40 grand in profit. You could distribute that to each of you. That's in a month. That's amazing. And it was the second month. Dude, I was sitting outside of my house that night looking at the money and I was like, dude, what did we do? I'm like, from a pop-up in a parking lot selling chicken, I'm like, we made this much cash. And I remember I went home and we had all these overdue bills and I put all the money in every single bill and I put a couple thousand on each of my parents' nightstands. And the next day they woke up and they're like, where did you get all this money?

46:25And I was like, pretty much like, don't worry about the bills from now on. We got everything covered from now on. So it was like, that was probably like one of the best nights of my life. It was just like everything like coming together, you know? Yeah. I heard that at some point you guys actually threw away your cash. Like you had your bag of cash and you threw it in a dumpster. We did it. Dude, so we finish every night because it wasn't the best neighborhood, right? And we were always kind of afraid that like somebody might try to rob us or something like that. All cash business, yeah. All cash business.

46:56So at night or throughout the night, what we do is we put our cash away in like a styrofoam container, like one of our to-go containers. At the end of the night, we take that home with us. So it was like inconspicuous. So one of the nights, you know, late into the pop-up, we get very tired. It's been a whole week and, you know, we're cleaning up and then we get to Tommy's house and we're like, okay, we're like, who has the cash so we can count it? And then Tommy's like, I think Dave has it. And I'm like, hey, Dave, do you have it? He's like, no, I thought you had it. And I'm like, dude, what do you mean?

47:23And I'm like, where's, I'm like, and we kind of started panicking because it's a lot of money, especially for us at the time. Cause we're like, you know, saving up. So we started looking around everywhere. It's not on the car. We're like, okay, we go back to the pop-up and we kind of realized pretty early on that we probably threw it away with the other styrofoam containers. But what sucks is we throw away like 150 styrofoam containers a night. We would throw away maybe 10 bags of trash a day. So we had to go across the street to our main dumpster, this big dumpster. and I had to and I told Tommy I'm like keep lookout I jump in the dumpster and the funniest thing is the money happened to be in the bag that we threw away our oil mix in so we make a oil mix and we put spices in there when it's boiling we mix it up and it becomes like this red oil mix and we throw that away at the end of the night yeah and that's where the money was so the money was covered in like red oil and I remember I got the money and I was really happy so I got out of the dumpster and I was like, Tommy, I got the money.

48:21And there was a guy there that was using the bathroom because there was a bar right there. And he looked at me and there's a guy like, and I'm, and I think about it now I was wearing like an apron and I had this like red dripping money and I was in a dumpster and he saw me and he freaked out and he ran away. And I'm sure till today that guy thinks he like witnessed the murder or something like that. So we found the money and we were, I mean, we were spending red money. It looked like we had robbed the bank because we had like money with like red dye on it. So, you know, we'd have to like slip it in as we were shopping.

48:48You know, we'd give like five greens and then one red in there. So, all right. You launched this thing in the parking lot on May 2nd, 2017. By January 1st, 2018, your brick and mortar opens. Before we talk about that, how did you guys – I mean, now you're bringing in serious money. So, presumably you had the money to take out a lease on a location. Yeah. Kind of. So the first couple of months, obviously, because we weren't that used to money, we just kept paying ourselves. And I think by the fourth month, we realized, like, okay, if we're ever going to get to a store fast, we have to stop paying ourselves and, you know, kind of put the money towards the store.

49:33And then that's kind of also where Gary came in, Tommy's older brother, because he was the oldest one. He had a little bit of experience with business. And did he have any money? Did he have a little bit of money to invest? He had money. He was the one that actually invested 60 % of the first store's funds, and then we put up the rest of it. Got it. And obviously, he was seeing how big Dave's was getting. And I mean, at the time, the pop-up was falling apart because we were seeing so many people. Our fryer was almost like, it was bad. We weren't able to handle the amount of people coming in. Every night, we were turning away a couple hundred people because we were sold out.

50:07So we were like, we really need to get to a store. So Gary was very on board. So we kind of started like store hunting. And what's funny is like Gary was like, well, first we need to like, he's like, we need to get at least a little bit legal, right? So like you guys need to at least establish Dave's as like a business, you know what I mean? So he sent us to a friend of ours, Rafi Babayan, who was a lawyer. So he kind of started helping us out on the legal end a lot. You know, even till today, like he's actually partners with us on our stores. Wow. And he helped, dude, he helped us so much. Like him and Gary were kind of the ones that came in.

50:42helped us a lot, like getting us to like a mature state. How did you guys divide the business up? Did you just split it evenly between the four of you? Evenly, yeah, evenly. And even in the parking lot, it was evenly between the three of us. And then - You brought Gary in and then - Yeah, yeah. We felt it's the most fair way to go. If everybody has an equal portion, then everybody puts in equal effort. I mean, it's kind of remarkable because as businesses get more successful, that can tear even friends apart. But that clearly didn't happen. No. You know, what's funny is we had this understanding of like you would rather own, let's say, 10 % of a cow than 100 % of a grape.

51:24So, you know, you would rather own 25 % of a store than 33 % of a pop-up. So to us, it wasn't how much, what was the percentage we owned? It was what did we own the percentage of, you know? How big was that pie? How big was that pie that we owned the percentage of? So a store was obviously much more valuable than a pop-up. One of the things that I think is really important is where you were, right? Because, you know, seven, eight months in, you have a brick and mortar. And the first brick and mortar was in East Hollywood as well, right? Yeah. And I think had you done this in like Birmingham, Alabama or, you know, Boise, Idaho, it wouldn't have – even if with the quality of what you're doing, it wouldn't have scaled so quickly because LA is a media capital of certainly the United States and one of the media capitals in the world.

52:17And being in LA, there's a critical mass, right? Like how important do you think LA was to just the rapid success of this brand? Very important. Very important. And I think Los Angeles not only played a big role in Dave's Hot Chicken, but Hot Chicken in general. because if you think about it, the second place that hot chicken really came after Nashville was Los Angeles. And Los Angeles is kind of what helped it really blow up into this nationwide thing. Everybody in the U.S. wants hot chicken now. So, all right, so you guys have this first store in Hollywood in 2018. Tell me about the design because there's a look.

52:59I mean, it's like sort of the stylized graffiti on the wall and you've got the rubber chicken. And tell me about how you were thinking about the design. It all goes back to when we were working on the recipe. So Splatterhouse, the guys that do our art, Demkin art, they're really close friends of mine from before Dave's, from when I used to stand up comedy. And they do amazing artwork. So I remember as we were working on the recipe and I talked to him like, hey, I'm like, we're doing this chicken thing and blah, blah, blah. And I'm like, one day if we have a store, like, would you guys be down to do art on the inside?

53:33And like, yeah, of course we would, you know, like, why wouldn't we? So as the store obviously came, they're the first people we called. So we kind of like, you know, came up with the first design just together. And it was, I mean, I should mention every single location is different. Yeah. And it's hand done by the same artists. And every single store has their own like mascot, Dave. So every store will have a Dave after like a pop culture figure. You have like Muhammad Ali Dave, you have like Bruce Lee Dave or Darth Vader Dave. So you have all of these. Every store has like their graffiti wall, their white walls, their neon lights, and then their particular Dave.

54:09All right. In that first store, how did you figure out how to, you know, how to run an operation? The store is different. An efficient operation to get enough orders out at a time and to meet the demand. And was it, you know, how did you guys start to figure that out? And we, it's actually really funny, as we were getting like kind of closer to opening, we watched the movie The Founder, the one about McDonald's. Oh, yeah. Great movie. So good. Michael Keaton. Yeah. And we saw that scene that how they were kind of like developing their kitchen system like with chalkboards and stuff. And we kind of took that inspiration and we went into our kitchen and we kind of tried to like understand like how we could set things up to have the fastest possible operations within the restaurant.

54:53And we eventually came up with this island system where there was like a table in the middle that everything would be put on, chicken, fries, and stuff. And then from there, you would kind of spice them up and then categorize them into mild, medium, hot. And then the person on the line would just turn around. So we kind of like using the inspiration from the founder developed our little like island system in our kitchen that we felt was like the most efficient for getting food out. That is so cool. That movie inspired you guys. Yeah, it was really fun, dude. It was really fun. Because you guys had ambitions even before you had the tent to have a franchise business.

55:25So by the time you opened a brick and mortar, you knew that it was just a matter of time before you could figure out a second location. Yeah, we knew we were close. And what's funny is even during the pop-up and up until now, we had so many people that would come and be like, oh, let me invest and make you guys a franchise. Let me do it. So we had a lot of offers going into it. Wow. But I think we kind of realized, one, it's too early. until we realized that the right partner is probably the most essential piece of the puzzle. So we were very careful with who we even consider as partners. But most of the people kind of didn't pass that energy check right away.

56:01So we didn't want to work with them. But you were open to this idea of having a franchise partner because you felt like the four of you guys were not even at the capital and even the experience to do it on your own. Yeah. Well, at the time, we were a little naive. So we felt like if we really tried, we maybe might be able to do it on our own. But looking back to it, there's no way. The amount of like overhead you need, the training, the scaling, it's almost impossible to do, I think, if you haven't done it before or have people with you that have done it before. It can be really easy to mess it up.

56:37When we come back in just a moment, the business gets a boost from two new partners and some big name celebrities. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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58:23Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2018 and Armand, Dave, Tommy and Gary have opened one chicken restaurant and are about to open another. And they're starting to think about finding franchise partners. And then almost on cue, someone leaves them a mysterious message. So I remember we were in our office and one of our friends that worked for us is one of our partners now, Vahe. He came into our office like, hey, somebody left a post-it note for you guys. And we're like, post-it note. And the post-it note said, founders of Dave's, please call John Davis. And we're like, who's John Davis?

59:03We're like, this is really weird. And Tommy's like, yo, guys, I have a really good feeling about this one. He's like, we should probably call. And we're literally going to throw it away if Tommy hadn't said that he has a feeling about it. So we call, and they go, Davis Entertainment, how may we help you? And me and the guys looked at each other like, he doesn't even pick up his own phone. This guy must be big. You know what I mean? And then he picked up the phone, and he was a really super cool guy. And he's like, hey, guys, like, you know, I heard, you know, you guys have a really popular restaurant.

59:30I really want to come out there and I want to like meet you guys in person and talk to you guys. We kind of did research on him and we found out like, you know, all the things he had done. And we saw that he had a lot of experience in growing restaurants. So fast forward, he comes in again, really nice guy. He meets all the founders. We give him a little bit of a tour of the restaurants and, you know, the kitchen. And we bring him out some food and he eats it. and I'll never forget dude like he was like he was eating this food and he was saying things so it's like he's like this is this is this business is going to be huge guys I'm going to get the rock I'm going to get Kevin Hart he was like throwing out all these celebrity names and stuff like that and I yeah I remember thinking either this guy is exactly who we need in life or he's just really crazy and this is just too good to be true yeah right and then after he finished like look guys like I want you guys to meet Bill Phelps right he's like he's you know he's like he's a guy I've worked with.

1:00:21He's very experienced in restaurants. He's like, why don't you guys meet with him tomorrow? He's like, I'd be really interested to see what he has to say about it, right? And this guy, Bill Phelps, this is the guy who co-founded Wetzel's Pretzels and Blaze Pizza. So clearly super experienced, deep experience in franchise businesses. Yeah. So the next day we meet Bill. And again, we loved his vibe. We love their energy. What we loved about them versus other investors that we had met is we felt like they actually really, they gave credit to the founders, you know, whereas a lot of people came in with this energy of like, you guys got really lucky.

1:00:55And you know, you guys don't know what you're going to do with this, they kind of understood that it doesn't seem like they got lucky, it seems like they knew a little bit of what they were doing, right. So we really appreciated that energy from them. And I remember that time, on social media, if we ever posted that we didn't have a line, we'd get like hundreds of people coming in because we always had a line. So I fake posted that we didn't have a line just because I wanted to be extra packed up. So when they came in, there was like 150 people in line and they were like, what the hell is going on?

1:01:23So we knew pretty early on that, you know, they had the right energy to work with. So in September of 2019, this investment group led by these guys, they took ownership over, I think 49 % or 50 % of Dave's hot chicken. uh i think it's uh 42.5 i think around there like 40s yeah and i mean you had two locations by this point so they basically they they came up with a valuation and they bought 42 percent of it and and this is yeah kind of yeah sorry no so what we kind of did was we um instead of like buying the company because again we uh kind of had like rafi to help us out like he was a friend of ours that was a lawyer that we trusted.

1:02:09So he kind of advised us that it might be smarter to just create a new franchise company, right? Like Dave's Franchise Co., instead of just selling the company. Because we knew that as the founders, we weren't ready to give up the company. The only way we wanted anyone to be a part of it is if they were going to continue to let us do things the way we wanted to do them. And we're just going to help us grow it versus take it off our hands. But basically, this was also an opportunity for the four of you guys to earn some upfront cash, but also to retain ownership. Yeah. But we earned no upfront cash.

1:02:45No upfront cash. No, no. We just, the money we raised kind of just went to, you know, hiring, you know, operations people and, you know, our head of sales. And so you didn't have like a, you didn't have like a payout at all. No, no. But you now had, and you retained, so you've got this franchise franchise business that they own a big chunk of, you guys retain the majority ownership over. And now, from what I understand, you guys, you, Dave, Tommy, and Gary become franchisees, basically. Yeah. So along with being franchisors, we continue because the stores were very profitable and because it was our source of income.

1:03:24One of the causes of the deal is as the founders, we want to continue to open more stores, right? So we didn't want to take any territories that were too far away from us. So we just took the Los Angeles area. And then we eventually took the Las Vegas territory because we felt like it was close enough for us to operate. So we kind of bought the territory of like Los Angeles. And with the founders, we own like, I think 11 stores now. So clearly, this was the direction you guys were heading in. And it was a risk, right? Because you could have given I mean, there, it could have, you had this brand, you had this product that you believed in.

1:04:02And franchising is risky because you're putting your brand into the hands of people who are going to run the stores, right? But at the same time, if it works, it could be hugely profitable. I mean, was there any doubt in your mind that this was the direction you should go in? There wasn't a doubt in our mind because that's kind of like what we had built the business to be. Obviously, talking to Bill and John, even just from the first couple of conversations, we learned a lot. A mistake they had made with Wetzels is they franchised anybody that wanted to buy a store, right? Anyone. Mom and pops, anyone.

1:04:41Yeah, mom and pops, anybody, which was a big mistake. And it's something that they did differently with Blaze is they only sold to experienced franchise groups that bought big territories. That's actually a much better idea is you only franchise to groups with multiple other stores that are running really good operations where this is exactly what they do, where when you give them the store and the training manuals and everything, they're going to know exactly what to do with it. Yeah. I'm curious about some of the people who got involved in investing were celebrities, Maria Shriver and Samuel L.

1:05:16Jackson and Michael Strahan. And I get pitched this all the time. People are like, our company has all these celebrity investors. And to be honest, my reaction is okay. I mean, a celebrity is a celebrity. Like it doesn't make them a good investor because they're famous. It just makes them – it just means they have money to invest. And then eventually Drake became a significant investor. You're obviously in LA, the center – world center of celebrities. But I mean how critical is having celebrities as investors on board to the success of Dave's? Um, it's pretty, I think Drake was the more critical one.

1:05:52You know, I think what it really helps with this franchise sales, right? Because, uh, as you're going after these really big franchise groups that own hundreds of stores, you know, they don't want to take a risk on a one store or two store concept, you know, as popular as they might be in Los Angeles. So, you know, having investors like, let's say saying, oh, Samuel L. Jackson is an investor and Drake is an investor. it gives them a little bit of assurance to like, okay, so maybe if they've invested, like maybe there's something here. So we would really use that to try to sell stores initially until the stores would open up and then they would kind of, you know, the numbers would speak for themselves.

1:06:28So you wouldn't necessarily have to use Drake's name as much or Samuel L. Jack's name as much. So then they eventually over time just became investors. But at first they were pretty key to us selling stores to big groups while only having one or two stores open. So, all right. Now, I think, how many locations are there now of Dave's? I mean, we had like, there was a point where the growth went crazy. So, you know, there was a time where it was like 10, 15 stores and out of nowhere it was like 50, 60, 70. And now we're like 200. 200 stores. And it's mostly in the U.S., but you've got some locations in Canada, which I've been to.

1:07:05And then Dubai? Dubai, Qatar. And I think we're pretty close to a UK deal. And I read that. It was amazing. I did not know this. That fried chicken, like basically the biggest market for fried chicken, is not the United States. It's Asia. People are crazy for fried chicken in like Korea and Japan and China and all over Asia. Are you guys, is that like the next frontier? year it's funny because that's that we're talking about that a lot lately you know we're talking about is there potentially a partner out there that you know we can talk to that is you know obviously at the quality we want that's willing to franchise Dave's out there so we're we're definitely in talks now I think we we kind of underestimated our international abilities it's not something that we really want to do yeah but kind of looking at how Dubai Qatar and Canada are performing, it seems like, you know, international could be a great market.

1:08:04And now you've got, as you mentioned, about 200 locations and the, and I think you've sold, how many franchises have you guys sold? I think 900. 900. Yeah. Wow. So there, this is going to expand. And if it expands according to the, to the plan, when, like how long before there are 900 Dave's, Dave's pot chicken? Maybe like four or five years, four years. Wow. Yeah, we opened pretty fast. I read that at the end of 2023, Bill Phelps, your CEO, said in an interview that on average, each day's location does about$2.8 million in revenue a year. Yeah. To put that into perspective, like a Subway sandwich chain probably does in the hundreds of thousands in revenue.

1:08:50Yeah, like$600 ,000. $600 ,000. A Taco Bell, probably between 1.8 and 2. Yeah, which is great. McDonald's probably does 2.2. Chick-fil-A is a different category. That's probably closer to like 9. But almost$3 million per restaurant. That's a lot of money. That's a great business. Yeah, it's very high AUVs for a franchise, franchise concept. Yeah. Arman, I wonder, I mean, now that you are a bigger company, You're going to have 900 locations in the next couple of years. And you guys have – how many franchises do you guys own, the four partners? I think 11 stores. Wow. So that's a full-time job right there.

1:09:33And you're also sort of the brand manager. But, I mean, what do you – I mean, you're so young. You're like in your early 30s, right? Are you 30, 31? 31. I just turned 31, yeah. Amazing. I mean, you were broke and trying to like break into comedy when you were like not that long ago. Like, and here you are like sitting on top of this incredibly successful empire of restaurants. What do you think about your future? I mean, you know, as Dave's gets bigger and bigger, it is going to get more corporate. That corporate is not a bad, evil word. I mean. No, it's not. Corporations can do great work. But it means there's more bureaucracy.

1:10:11There's more pans and, you know, there's more cooks in the kitchen, so to speak. So do you imagine you kind of staying in that corporate role long term? Yeah. So at least for like the foreseeable future, Dave's is a pretty like corporate company, but at the same time, we're very also mom and pop, right? Like you have Bill and John who are these really experienced people that have done it a million times before. And then you have these four young guys that are like high school dropouts that, you know, are more consumers. So we, you know, you combine those two things and there's this really good balance of understanding that goes on between the partners, right?

1:10:51And it helps the company be really healthy. There's like 30-year-old high school dropouts and then these guys that have done crazy huge franchise concepts. When you think about, you know, this journey you took and where you guys got to and where you are now. I mean, you're so young, you're going to make a lot of money over the course of your life. Even if you drop out and just are a passive owner, how much of where you got to to this point do you think has to do with the grind and the work you put in? And how much do you attribute to just the luck of timing with hot chicken and I don't know, and just the luck?

1:11:29I think it's we got lucky that you know hot chicken started to trend in Los Angeles but at the same time if Dave hadn't dedicated half of his life to studying culinary it wouldn't have really helped us right and then even when it came to you know the marketing you know yeah we were lucky that I had a little bit of you know marketing knowledge from doing the comedy and stuff but at the same time like you needed the skill right so everything is a little bit of the skill and luck and you kind of need a little bit of luck to show your skill. But I think it doesn't matter how lucky you get and it doesn't matter how many people write about you.

1:12:06If your product is not good at the end of the day, none of it matters. And if your product is good, then somehow you're always going to end up getting lucky somehow, right? That's Arman Oganessian, co-founder of Dave's Hot Chicken. By the way, their spiciest chicken recipe is called the Reaper, and it's so hot that people who order it actually have to sign a waiver. It says, eating the Reaper can cause you harm, including bodily injury, property damage, emotional distress, or even death. One Reaper eater who did not die said, quote, I felt like a small grizzly bear was inside me trying to claw its way out.

1:12:52Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And of course, it's free. And don't forget to sign up for my free newsletter at guyroz.com. This episode was produced by Sam Paulson with music composed by Ramtin Arablui. It was edited by Neva Grant with research help from Catherine Seifer and audio engineering by Robert Rodriguez and Patrick Murray. Our production staff also includes Casey Herman, J.C. Howard, Alex Chung, John Isabella, Elaine Coates, Kerry Thompson, Chris Messini, and Carla Estevez.

1:13:27I'm Guy Raz, and you've been listening to How I Built This.

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